2015 (3) TMI 538 - HC - Income Tax

High Court limits Settlement Commission's rectification powers under Income Tax Act, clarifies interest imposition.

The High Court allowed three petitions challenging rectification orders by the Settlement Commission under the Income Tax Act. The court ruled that the ... Recourse to rectification proceedings u/s 154 by Settlement Commission - levy interest under Section 234A, 234B and 234C - Held that:- The Larger Bench of the Apex Court in Brijlal and Ors Vs. CIT reported in [2010 (10) TMI 8 - SUPREME COURT ] has now resolved the controversy and held that the Settlement Commission has no power to reopen a proceedings concluded by a final order under Section 245D(4) of the Act by invoking Section 154 of the Act. Thus where there is no power to rectify, the levy interest cannot be imposed by rectifying a concluded order under Section 245D(4) of the Act. - Decided in favour of assessee. Issues:Challenging orders passed by Settlement Commission for rectification under Section 154 of the Income Tax Act, 1961 to levy interest under Sections 234A, 234B, and 234C after it was waived in a previous order under Section 254D(4) of the Act.Analysis:The judgment deals with three petitions challenging orders passed by the Settlement Commission to rectify previous orders under Section 245D(4) of the Income Tax Act, 1961. The rectification sought to impose interest under Sections 234A, 234B, and 234C, which had been waived in an earlier order under Section 254D(4) of the Act. The petitions were admitted and scheduled for final disposal, and the court referred to a question posed by the Apex Court regarding the Settlement Commission's authority to use rectification proceedings to levy interest under specific sections of the Income Tax Act. The court granted interim relief until a decision was made by the Apex Court.Subsequently, the petitions were adjourned pending a decision by the Larger Bench of the Supreme Court in a related case. The Larger Bench of the Apex Court later ruled that the Settlement Commission does not have the power to reopen concluded proceedings under Section 245D(4) by invoking Section 154 of the Act. This decision clarified that if there is no authority to rectify, interest cannot be imposed by rectifying a finalized order under Section 245D(4) of the Act. As a result of this ruling, all three petitions challenging the rectification orders were allowed by the High Court, with no costs imposed.In conclusion, the judgment provides clarity on the limitations of the Settlement Commission's power to rectify orders under the Income Tax Act, specifically regarding the imposition of interest under certain sections. The decision reinforces that rectification cannot be used to levy interest when there is no authority to rectify a concluded order under the Act.